Wednesday, March 4–Jim Wyckoff’s Morning Markets Report
Global stock markets were mixed to firmer overnight, following the big sell off in the U.S. stock market Tuesday. U.S. stock indexes are pointed toward solidly higher openings when the New York day session begins. Look for another very active day in U.S. markets.
The global marketplace on Wednesday is still digesting the surprise 0.5% interest rate cut delivered by the U.S. Federal Reserve on Tuesday morning. That move, at least initially, roiled the U.S. stock market and, importantly, sent the yield on the benchmark 10-year U.S. Treasury note plummeting to a record low, below 1.0%. Wednesday morning the yield on the 10-year note was around 9.85%. Veteran market watchers are taking a very dim view of the drop in U.S. Treasury yields, as it is a signal of impending U.S. and/or global economic recession. It’s also suggestive of potential consumer and commercial price deflation. Deflation is the archenemy of many markets, including raw commodities.
Part of the rebound in the U.S. stock market overnight is likely due to former U.S. Vice President Joe Biden’s strong performance in the “Super Tuesday” Democratic presidential primaries. Biden’s solid showing dented socialist-leaning candidate Senator Bernie Sanders’ momentum. Most agree the U.S. stock market would not like a Sanders presidency.
Meantime, the Covid-19, or coronavirus, outbreak continues to spread worldwide and especially outside of China. There are anecdotal reports of consumer hoarding of basic goods in the U.S. The outbreak is being perceived by analysts and economists as seriously denting world economic growth, at least for a short period of time, or maybe not so short. More central banks are expected to soon announce they are easing their monetary policies to help thwart the negative economic impacts of the outbreak, following the U.S. and Australian moves earlier this week.
In overnight news, China’s private Caixin purchasing managers index (PMI) February showed a manufacturing reading of 40.3 versus 51.1 in January and 46.0 forecast. The Caixin services PMI was 26.5 versus 51.8 in January and 48.0 forecast. The Caixin composite PMI was 27.5 compared to 51.9 in January. Hong Kong’s Markit PMI came in at 33.1 in February, down from 46.8 in January and marked the steepest drop since at least 1998, when the survey began. The Euro zone February composite PMI was reported at a better-than-expected 52.6 versus 51.3 in January. A reading below 50.0 suggests contraction in the sector.
The key outside markets today see Nymex crude oil prices higher and trading around $47.75 a barrel in early trading. The U.S. dollar index is trading up today following recent strong selling pressure.
U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the ADP national employment report, the U.S. services PMI, the ISM non-manufacturing report on business, the global services PMI and the weekly DOE liquid energy stocks report.
–Jim
U.S. STOCK INDEXES
June S&P 500 e-mini futures: Prices are solidly up in early U.S. trading. Bears still have the overall near-term technical advantage. The shorter-term moving averages (4-, 9- and 18-day) are still bearish early today. The 4-day moving average is below the 9-day and 18-day. The 9-day is below the 18-day moving average. Short-term oscillators (RSI, slow stochastics) are bullish early today. Today, shorter-term technical resistance comes in at 3,100.00 and then at this week’s high of 3,131.00. Buy stops likely reside just above those levels. Downside support for active traders today is seen at 3,000.00 and then at the overnight low of 3,269.75. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 6.5
June Nasdaq index futures: Prices are solidly higher in early U.S. trading. Bears are still in mild technical control. Shorter-term moving averages (4- 9-and 18-day) are bearish early today. The 4-day moving average is below the 9-day and 18-day. The 9-day average is even with the 18-day. Short-term oscillators (RSI, slow stochastics) are neutral to bullish early today. Shorter-term technical resistance is seen at 8,800.00 and then at 8,900.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at 8,700.00 and then at 8,600.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 6.5.
U.S. TREASURY BONDS AND NOTES FUTURES
June U.S. T-Bonds: Prices are higher and not far below Tuesday’s contract high in early U.S. trading. Bulls have the solid overall near-term technical advantage. Shorter-term moving averages (4- 9- 18-day) are bullish early today. The 4-day moving average is above the 9-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral early today. Shorter-term technical resistance is seen at the overnight high of 173 16/32 and then at 174 even. Buy stops likely reside just above those levels. Shorter-term support lies at the overnight low of 172 6/32 and then at 171 16/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.5
June U.S. T-Notes: Prices are higher in early U.S. trading and not far below Tuesdayy’s contract high. Bulls have the solid overall near-term technical advantage. Shorter-term moving averages (4- 9- 18-day) are bullish early today. The 4-day moving average is above the 9-day and 18-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral to bullish early today. Shorter-term resistance lies at the overnight high of 136.13.5 and then at the contract high of 136.23.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 135.28.5 and then at 135.20.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.5
U.S. DOLLAR INDEX
The June U.S. dollar index is higher on a corrective bounce after hitting a six-week low Tuesday. A bearish V-top reversal pattern has formed on the daily bar chart. The shorter-term moving averages for the dollar index are bearish early today, as the 4-day is below the 9-day and 18-day. The 9-day is below the 18-day moving average. Short-term oscillators for the dollar index are neutral to bullish early today. The dollar index finds shorter-term technical resistance at Tuesday’s high of 97.375 and then at this week’s high of 97.710. Shorter-term support is seen at the overnight low of 96.900 and then at Tuesday’s low of 96.635. Wyckoff’s Intra Day Market Rating: 6.0
NYMEX CRUDE OIL
April Nymex crude oil prices are higher on short covering and bargain hunting after hitting a 14-month low Monday. The shorter-term moving averages are bearish early today as the 4-day is below the 9-day and 18-day. The 9-day is below the 18-day moving average. Short-term oscillators (RSI and slow stochastics) are bullish early today. Look for buy stops to reside just above technical resistance at this week’s high of $48.66 and then at $49.00. Look for sell stops just below technical support at the overnight low of $46.79 and then at $46.00. Wyckoff’s Intra-Day Market Rating: 6.0
GRAINS
US grain futures are mixed in early US pre-market trading Wednesday. Corn is near steady, soybeans 4 to 5 cents higher, and wheat around 3 cents lower. The global stock markets are rallying Wednesday morning, but that could change when the U.S. stock market opens. Grain traders will continue to look to the stock and financial markets for direction, but the bulls will continue to be tentative amid the anxiety presently in the marketplace.
IMPORTANT NOTE: I am not a futures broker and do not manage any trading accounts other than my own personal account. It is my goal to point out to you potential trading opportunities. However, it is up to you to: (1) decide when and if you want to initiate any traders and (2) determine the size of any trades you may initiate. Any trades I discuss are hypothetical in nature.
Here is what the Commodity Futures Trading Commission
(CFTC) has said about futures trading (and I agree 100%):
1. Trading commodity futures and options is not for everyone. IT IS A VOLATILE, COMPLEX AND RISKY BUSINESS.
Before you invest any money in futures or options contracts, you should consider your financial experience, goals and financial resources, and know how much you can afford to lose above and beyond your initial payment to a broker. You should understand commodity futures and options contracts and your obligations in entering into those contracts. You should understand your exposure to risk and other aspects of trading by thoroughly reviewing the risk disclosure documents your broker is required to give you.
Jim Wyckoff